June 25, 2020 / 6:09 PM / 6 days ago

EXCLUSIVE-France, Netherlands close to deal on KLM bailout - sources

(Updates with more precise aid figure, details, background)

By Toby Sterling and Laurence Frost

AMSTERDAM/PARIS, June 25 (Reuters) - France and the Netherlands are close to an agreement on a Dutch Air France-KLM bailout contribution, several sources with knowledge of the matter told Reuters on Thursday.

Under the deal, which could be announced as soon as Friday morning, the Dutch government would unblock about 3.4 billion euros ($3.8 billion) in guaranteed and direct loans to KLM and appoint a trustee to its board, two of the people said.

The airline group and the French finance ministry declined to comment. Dutch government officials did not respond to requests for comment.

The governments, which each own about 14% of Air France-KLM, unveiled 7 billion euros in French aid in April and a planned 2-4 billion from the Netherlands as the coronavirus crisis brought air travel to a near-halt.

But the Dutch funds have been held up by parliamentary scrutiny and by tense negotiations in which France rebuffed The Hague’s demands for a seat on the KLM board, which would have weakened the group’s hold on its Dutch subsidiary.

Instead, the agreement to be announced would see the appointment of a non-voting government trustee to ensure that Dutch taxpayers’ bailout money is strictly reserved for KLM operations, the sources said.

The French and Dutch governments remain at loggerheads over management and strategy at Air France-KLM, created by the 2004 merger between the two national carriers.

Frustrations exploded in March last year with the Dutch state’s surprise acquisition of a stake in the group, designed to match France’s holding and counter its clout.

Prior to the pandemic, a specially convened intergovernmental group had reported no progress on issues including Dutch demands for board seats and greater KLM autonomy from its parent group.

But the KLM aid deal may also resolve parts of that stalemate, sources said, after the subject came up in talks this week between French President Emmanuel Macron and Dutch Prime Minister Mark Rutte.

The Dutch aid package is also likely to come with environmental conditions and restrictions on executive pay demanded by lawmakers.

$1 = 0.8908 euros Reporting by Toby Sterling and Laurence Frost; additional reporting by Anthony Deutsch; Editing by Edmund Blair, Kirsten Donovan

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